Africa calling

Africa calling
Published: 04 August 2004

Lafarge, is reportedly  broadening its investment in Africa. Its president
for Africa, Tony Hadley, who was in the country for the announcement of
Bamburi’s half-year results, said this is was part of the group’s strategic
plan to increase the weight of its investment in emerging markets.

"Within the group, there is intense competition for funds for investment in
emerging markets, and we see Africa, presenting good market potential", he
said. Indeed, the Group’s first quarter sales results highlights Nigeria,
South Africa and Kenya as the markets in African that registered tremendous
growth in sales volume across the four divisions.

In Kenya, for the six months to June 30 this year, Bamburi made Sh821
million compared to Sh517 million registered over the same period last year,
an increase of 59 per cent. The good performance was attributed to better
price relations, arising from from stable market conditions and growth in
demand within its Kenyan market.

After an aggressive investment programme that spanned Kenya (Bamburi Cement
and East Africa Portland Cement), Nigeria, Benin, Cameroon, Uganda,
Tanzania, Zimbabwe, Zambia, Malawi, South Africa and Madagascar, as Lafarge
tried to stay ahead of its main rivals HeidelbergCement of Germany and South
Africa’s PPC group, a decision was taken to increase investment in other
areas.

"We have consolidated our position and presence in Africa and our next
development agenda in emerging markets is to combine large acquisitions and
small and medium sized internal and external developments to cement this
forte", said Mr Hadley.

He explained that part of the Group’s strategy in the new development agenda
for emerging markets is to build new plants, buy existing competition and
scale them to Lafarge standards. Bamburi’s acquisition of Uganda’s Hima
Cement, as well as it huge stake in local rival East Africa Portland Cement
(EAPC), is symptomatic of this new development agenda.

Mr Hadley was, however, hard put to defend the Group’s equity in local
rivals, a situation critics have used to accuse Bamburi of monopolistic
tendencies, saying only that the investments in EAPC and Athi River Mining
(ARM) are historical.

He said that the cost of doing business in Africa rises by the day, and the
regulatory framework is skewed, thus making competition uneven. He cited the
example of Nigeria where foreign manufacturers are charged twice the cost of
power compared to local companies.

"You have situations where cement is imported at a duty of 10 per cent to
distort domestic prices while factory spare parts are levied at 40 per
cent."

He lamented at the unpredictable costs and quality of power, water,
telecommunications, rail, roads and fuel. In listing the challenges the
conglomerate faces in African markets, Mr Hadley pointed at the poor road
network and unreliable availability of coal in Tanzania; frequent fuel
shortages and poor satellite telecoms network in Nigeria; high cost and
unreliable quality of power in Kenya; high cost of money (borrowing) in
Malawi with interest rates upwards of 46 per cent, among others.

"Pro-market, pro-liberalisation policies need to be institutionalised in key
sectors of the economy that have a direct bearing on sound infrastructure,"
he said, adding that absence of proper consultation, implementation and
government participation in private business continue to negate any gains on
the economic development.